EU Official Urges Caution on Russia-Algeria Gas Deal

Posted 27 November 2006 @ 10:11 am EET     Print     Reprint     E-Mail     Comments

ORAN, Algeria (Reuters) - The European Union should be "on guard" about Gazprom's cooperation deal with Algeria's Sonatrach because it cannot take security of supply for granted, Energy Commissioner Andris Piebalgs said on Sunday.

The 25-nation bloc, which relies on the Russian gas monopoly for a quarter of its supply, is sensitive to its dependence on foreign energy providers.

"We should be on guard because of security of supply," Piebalgs told reporters on the sidelines of a conference on investment opportunities in Algeria. "We should not take security of supply for granted," he added.

"We should proceed, but with our eyes open. We should keep an eye on what happens in the world of producers."

In August, Gazprom and Sonatrach agreed to cooperate in the liquefied natural gas business, "upstream" asset swaps, and joint bidding for assets in third countries.

The European Commission said then it was closely following the deal after Italy said it could increase dependence on a limited number of gas suppliers and may lead to higher gas prices in Europe.

Gazprom, the world's leading gas producer, supplies Europe with a quarter of its gas needs, and Sonatrach is also a major gas exporter to the continent.

Gazprom has 1.03 trillion cubic feet of natural gas in reserves, while Sonatrach, the world's seventh-biggest gas reserve owner, has 149 billion cubic feet.

Piebalgs said a disruption to power supply early in the year had given the EU "a wake up call" a reference to Gazprom's cutting of supplies at the New Year in a price dispute with Ukraine.

The move shocked EU members countries, and stirred speculation that cooperation between Algeria and Sonatrach was a step towards forming a gas producers cartel.

Asked if he was still concerned, Piebalgs replied: "At the start it aroused lots of worry, because if there is a cartel there is not really a problem of price but there could rather be a problem of capacity which one could have at the same time."

"One could see cooperation between Algeria and Russia in another domain, for example technology, natural gas liquids, where Algeria has lots of experience but Russia not much, (or) a domain in which cooperation between Gazprom and Algeria could help Gazprom."

Rising energy prices were a major challenge for Europe because they influenced competitiveness, he said. "We should understand that the time of cheap oil and cheap gas is all in the past," he said.